Excerpt:.....impugned order of the collector (appeals) that the present appeal has been preferred before us.5. shri rangaswamy, the learned advocate for the appellants argued the case at length. he submitted that the gifting of the goods by the holland party to the appellants was a gesture of goodwill in the interest of business promotion. while applying for the itc licence the appellants had furnished to the licensing authority full information with regard to what was to be supplied by the holland party. in fact, the catalogue wherein the goods in question to be supplied were described, had been enclosed with the application for the licence.according to him the lower authorities had gone wrong in holding that the appellants had imported a projection system comprising a video tape recorder and a.....

Judgment: 1. The present appeal is directed against the order dated 6.12.1982 passed by the Collector of Customs (Appeals), New Delhi.

2. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of electric typewriters and are registered as a small scale unit with the Directorate of Industries. Delhi. In connection with their business activity the appellants were regularly importing parts of electric typewriters from M/s. Business System Incorporated. Holland (hereinafter to be referred to as Holland Party) Vide letter dated 29 6.1981, the Holland party wrote to the appellants that they had acquired the Remington Rand Factory which was manufacturing highly sophisticated office equipment including electric typewriters. They further stated that they had developed a set of 50 video tapes for training technicians and line workers in assembling the electric typewriters. The letter further stated that as a measure of goodwill and promotion of mutual business interest, they would be supplying to the appellants a set of 50 video tapes alongwith a video system free of cost except for the freight charges and customs duty leviable on such goods in India. On receipt of this letter, the appellants made an application on 31.8.19X1 to the Chief Controller of Imports & Exports, New Delhi (CCI & E) for issue of a Customs Clearance Permit (CCP) for the import of video system. The items for which CCP was required were listed as "Video Tape Recorder, Television and Video Tapes". The value of the goods was stated to be US dollar 2500 f.o.b.

estimated freight and insurance charges as US dollar 1000, thus totalling c.i.f. value of US dollar 3500. The nationality of the donor was shown as Dutch and the country of shipment was shown as Netherland.

This licence is issued subject to the condition that the goods imported against it will be used/utilised by the licensee himself for the purpose it is being imported and not to be sold or disposed of otherwise.

It would appear that later on the appellants were informed by the Holland party that instead of goods being supplied by them from Holland, the same would be despatched to them from their agents at Hongkong by air-freight. Accordingly, the appellants again approached the CCI&E who changed the country of shipment and the currency area in the ITC licence so that the said licence became valid for shipment of the goods from Hongkong. On receipt of the necessary papers from the Hongkong party, the appellants filed bill of entry No. 16673, dated 12.5.1982. On scrutiny of documents and actual examination of the goods, the Customs authorities considered that there was a prima facie case of mis-declaration of value as well as non-coverage of the goods by the licence produced. The party requested the Customs authorities to waive the issue of a show cause notice and adjudication of the case after personal hearing. The Deputy Collector of Customs, who adjudicated the case, before the start of the personal hearing, brought to the notice of the appellants that they had to answer the following allegations, namely: I. While the declaration in the bill of entry does not mention anything about projection system or any such system, the goods on actual examination had been found to consist of, apart from the video tape recorder, a television projection system including a separate screen.

II. The import licence allowed 50 Nos. of recorded tapes whereas only 8 tapes were imported. Of these 8 tapes, 3 were found blank and 5 were recorded with Indian films. In this regard the conditions of the licence were not complied with.

III. According to the Department, the goods had been mis-declared with regard to the description as well as valuation.

3. After hearing the explanation of the representative of the appellants, the case was adjudicated. The Deputy Collector held that the charge of mis-declaration of value and description as also of the goods in question not being covered by a valid ITC licence stood proved against the appellants. The Deputy Collector accordingly ordered; (i) Confiscation of the video tape recorder under Section 111(m) of Customs Act, 1962 (hereinafter to be referred to as the Act).

Permission was granted to the appellants to redeem the tape recorder on a fine of Rs. 2000/-.

(ii) A Sony colour video projector and Sony video screen were absolutely confiscated under Section 111(d), 111(1) and 111(m) of the Act.

(iii) 8 video tapes, 3 of which were un-recorded, were also confiscated absolutely under Section 111(d) and 111(m) of the Act.

(iv) For deliberate acts of omission and commission on the part of the appellants a penalty of Rs. 5000/- was imposed on them under Section 112(a)of the Act.

4. Aggrieved with this order of the Deputy Collector, the appellants filed an appeal before the Collector (Appeals), New Delhi. While substantially agreeing with the findings of the adjudicating authority, the Appellate Collector modified the order of the said authority in the following terms: 1. The absolute confiscation of the colour video projector and the screen was modified and an option was given to the appellants to redeem the same on a fine of Rs. 7000/-.

2 The 8 video cassette tapes were allowed to be redeemed on a fine of Rs. 2000/-.

3. The personal penalty of Rs. 5000/- was reduced to Rs. 3000/-. It is against the impugned order of the Collector (Appeals) that the present appeal has been preferred before us.

5. Shri Rangaswamy, the learned advocate for the appellants argued the case at length. He submitted that the gifting of the goods by the Holland party to the appellants was a gesture of goodwill in the interest of business promotion. While applying for the ITC licence the appellants had furnished to the licensing authority full information with regard to what was to be supplied by the Holland party. In fact, the catalogue wherein the goods in question to be supplied were described, had been enclosed with the application for the licence.

According to him the lower authorities had gone wrong in holding that the appellants had imported a projection system comprising a video tape recorder and a video projection system including a separate screen. The appellants had imported a Sony TV monitor alongwith Akai video tape recorder. Both these items were specifically mentioned in the ITC licence issued to them. With regard to the discrepancies about video tapes, Shri Rangaswamy stated that there had been some mistake in the despatch of the same on the part of the foreign supplier. The understanding given to the appellants by the Holland party was that they would be supplying 50 tapes for training purposes in the assembly of electric typewriters. The appellants were not aware under what circumstances instead of 50 such tapes being supplied, the appellants got 3 unrecorded tapes and 5 tapes with Indian films. Shri Rangaswamy further submitted that originally the goods were to come from Holland but due to reasons not fully known to the appellants, the Holland party later on instructed their Hongkong agent to despatch the same from Hongkong. When this mistake came to the notice of the appellants, they took up the matter with the Holland party. When questions were put to the learned Counsel as to what happened to the 50 recorded tapes for training purposes, he stated that he had no information on this point.

Shri Rangaswamy further submitted that the lower authorities had laid lot of stress on the fact that the appellants had imported a video projection system whereas the ITC licence covered other items. He read out certain portions of the recommendatory letter of the CCI&E wherein it had been stated that there was no difference between the video monitor and the video system. In any event the learned Counsel emphasized that the appellants had not kept back any information from the licensing authorities with regard to the nature of the goods to be imported and, therefore, even if there had been some discrepancy between the description of the goods as given in the ITC licence and those supplied by the Hongkong party, the appellants deserved to be treated leniently.

6. Shri Mahesh Kumar, the learned SDR submitted that the entire case of the appellants as put forth by Shri Rangaswamy was full of twisted facts and missing links. What was imported was merely a video projection system capable of being used for commercial purposes or personal pleasure. The main fact to be remembered was that the whole correspondence started with an offer of 50 recorded tapes for technical training purposes along with matching video system. However, no technical tapes were imported and only 3 blank tapes and 5 tapes recorded with Hindi films were supplied in their place. The appellants have not given any satisfactory explanation as to why the goods which were supposed to come from Holland were ultimately despatched from Hongkong. The Hongkong party, as could be seen from the record, was a Store dealing in electric/electronic items and had nothing to do with electric typewriters. The appellants had failed to produce any evidence to satisfactorily explain as to why the supply point was shifted from Holland to Hongkong. Shri Kumar emphasized that there were many missing links in the correspondence exchanged between the parties. He stated that it was very pertinent that whenever a missing link in the correspondence was brought to the notice of the learned Counsel and he was asked to explain it Shri Rangaswamy took the position that either the relevant document was' not available with him or the connected transaction could have taken place through telephone or through personal visits, Illustrating this point, Shri Kumar stated that Shri Rangaswamy had no satisfactory explanation as to why the invoice was made by Radio Centre in the name of the appellants and not in the name of the donor, namely, the Holland party. Shri Mahesh Kumar submitted that from all these facts, the lower authorities were correct in coming to the conclusion that what the appellants had imported was a video projection system and it had nothing to do with technical training of any type. Further, the goods imported were not covered by the description of the goods as given in the ITC licence. Shri Mahesh Kumar drew our pointed attention to the fact that the appellants had not produced the catalogue which they had furnished to the CCI&E for procuring the licence. Shri Mahesh Kumar also pointed out that ITC licences are invariably issued for new goods. However, where licences are issued, in exceptional cases, for used goods such as machinery items, a specific endorsement is made in the body of the licence itself. In the appellants' case, no such endorsement was made that the goods to be supplied were to be re-conditioned goods. On this count also, the licence produced by the appellants was not valid. Taking the totality of evidence in this regard, Shri Mahesh Kumar submitted that the appellants had consciously and clearly violated the provisions of the ITC licence and penal action taken by the lower authorities in this regard was quite correct.

7. We have heard the arguments of both sides with regard to the ITC licence produced by the appellants, We are dazzled at the sequence of events commencing from the Holland Parly's letter dated 29.6.81. There was nothing wrong on the part of the appellants to accept an unsolicited gift of 50 recorded tapes along with necessary equipment to import techncal training to the technicians. However, what they actually imported is something quite different. Not a single tape out of the 50 of technical recordings has come. Instead of 50 such tapes, only 8 tapes have come, which are either blank or are recorded with Hindi films. During the course of arguments, Shri Rangaswamy was not able to answer many pertinent questions as to how the goods which were to come from Holland party were ultimately despatched by an ordinary commercial store from Hongkong. The answers given by Shri Rangaswamy to such important questions were found to be quite evasive leaving a distinct impression on our minds that all was not well in the conduct of the whole transaction We therefore, see a lot of force in the stand taken by learned SDR that the appellants were interested only in importing a purely commercial video-cum-projection system either for commercial purposes or for their personal use. We are not at all satisfied with the version of the learned Counsel for the appellants that the goods sought to be imported were for imparting technical training to the technicians of the appellants. Despite persistent questioning as to what happened to the 50 tapes with technical data, Shri Rangaswamy was not able to satisfy us at all. We, therefore, accept the contentions of the learned SDR and hold that the action taken against the goods for violation of ITC provisions was just and proper.

8 The second charge levelled against the appellants is that of undervaluation of the goods. It was argued by Shri Rangaswamy that the appellants had obtained licence for approximate c.i.f. value of Rs. 30,700/- only. However, as per the arrangement between the Holland party and the appellants, the appellants were required to pay in Indian rupees the freight and insurance charges only and equipment and tapes were to be supplied free of charge. He invited our attention to cash memo No. 1082, dated 15.3.82/-20.4.1982 issued by Radio Centre, Hongkong. In the said cash memo, the value of Sony TV Monitor is shown as US dollar 900 (F.O.B.), Akai Video tape (cassette recorder) as US dollar 600 (F.O.B.) and Video cassettes 8 Nos. at US dollar 60 (F.O.B.), totalling US dollar 1560, He also emphasized the facts that the cash memo clearly showed that it was 'no charge' invoice and only freight was to be collected from the consignee's end. Shri Rangaswamy also pointed out that the lower authorities had adopted higher values for the goods ignoring the clear indication on the body of the cash memo that the TV Monitor and video recorder were display pieces and had been re-conditioned. He submitted that the appellants had not paid anything towards the cost of the goods. It was borne by the Holland party and the appellants had only paid towards freight and insurance.

He also pointed out that the Department had not adduced any evidence to show that any unauthorised remittance had been made by the appellants towards the cost of the goods. Summing up the case of the appellants for valuation, Shri Ranpaswamy submitted that the lower authorities had grossly over-valued the goods relying on Andrew's catalogue. Such a catalogue, the learned Counsel emphasized, could not be relied upon as it was a matter of common knowledge that heavy discounts were allowed in the cash memos merely for the asking. The Department had not produced any evidence of contemporaneous import of similar goods at values lower than the ones shown in the cash memo of the Hongkong party. In this connection Shri Rangaswamy invited our attention to the Tribunal's judgment Martgla Brothers v. Collector of Customs, Bombay. With regard to the observations made by the lower authorities that cash memos had been tampered with and objection had been taken to the insertion of the words 'display pieces and reconditioned', Shri Rangaswamy stated that no tampering, as alleged, had been done. As the goods in question were kept in the showroom of the Radio Centre at Hongkong and had to be re-conditioned before being despatched to India, an endorsement in the cash memo had been made by the same person who had prepared the invoice. According to the learned Counsel, the lower authorities' case was based on suspicion, surmises and conjectures. According to him, this Tribunal had held in several similar cases that a charge of undervaluation has to be proved with cogent evidence on record and no reliance ought to be placed on suspicions and surmises. Shri Rangaswamy further submitted that after lot of painstaking effort, the appellants had succeeded in laying their hands on an advertisement which appeared in the New York Times of October 17, 1982, wherein a model of the goods of the type imported by the appellants had been offered for sale at US dollar 1395 only.

9. Shri Mahesh Kumar submitted that the cash memo produced by the appellants suffered from various infirmities and could not be relied upon as an acceptable piece of evidence. It was not clear as to why two different dates were given on the same cash memo, namely, 15.3.1982 and 20 4.1982. It was not customary to give two different dates on the same cash memo for the same goods. He also submitted that the words 'display pieces and reconditioned' were inserted some time later and not when the cash memo was prepared initially. According to the learned SDR this insertion was deliberately made to cover up undervaluation angle. By describing the goods as display pieces and re-conditioned unit, the appellants tried to show that the goods were not new and were, therefore, entitled to be priced at substantially reduced levels. On the other hand, on actual inspection by the lower authorities, the goods in question were found to be new and showing no signs of re-conditioning. A representative of the appellants was also present when this inspection was carried out and no objection was raised by him. Shri Mahesh Kumar submitted that the cash memo produced by the appellants was totally an unreliable document and the Department was fully justified in rejecting its authenticity. With regard to the point raised by Shri Rangaswamy that not much reliance could be placed on the values shown in Andrews' catalogue, the learned SDR submitted that the lower authorities had in many cases to refer to such catalogues issued by reputed stores. Wherever necessary, suitable deductions were allowed by assessing officers, for instance, for the article being used or being of an obsolete model. In the instant case, the lower authorities had allowed 20% discount from Andrews' catalogue price Referring to the advertisement which appeared in the New York Times and relied upon by Shri Rangaswamy, Shri Mahesh Kumar stated that the same was of no help to the appellants' case. The advertisement had appeared in October, 1982 whereas the goods in question were imported in April 1982.

Further, the price quoted in the advertisement did not show particulars such as age of the article and circumstances in which it was being sold. Shri Mahesh Kumar submitted that taking the entire evidence, the lower authorities exercised the best judgment formula and no fault could be found in their having done so. He, therefore, submitted that the valuation of the goods as done by the lower authorities was just and proper.

10. We have given due consideration to the contentions of both sides with regard to the valuation of the goods. We have examined the cash memo produced by the appellants. A query was put to the learned Counsel as to why the cash memo bore two dates, namely, 15.3.1982 and 20.4.1982. Shri Rangaswamy stated that originally the invoice had been prepared on 15.3.1982. It had to be given the second date of 20.4.1982 because the licence issued on 26.3.1982 was duly amended on 14.4.1982 and, therefore, the cash memo was given the subsequent date of 20.4.1982. As regards the insertions in the body of the invoice, these also seem to be very unusual in character. If the goods were re-conditioned, as is the case of the appellants, it is not understood as to why on actual examination in the presence of the representative of the appellants the same were found to be new and totally unused. The learned Counsel's explanation is that at the time of customs examination only a clerk of the clearing agents was present. This again is a very unsatisfactory explanation. In a matter of such importance, it was the duty of the appellants to have deputed some responsible person to be present when the goods were being examined. In any event, the appellants cannot take the present plea because the clearing agent was acting on their behalf. The appellants' contention is also not borne out by the fact because while describing the goods in the bill of entry, no mention was made that the same were re-conditioned. Reference was also made by the learned Counsel to our judgment in the case of Mangla Brothers v. Collector of Customs, Bombay . In this case of M/s. Mangla Brothers, reference was to a letter written by one of Indian Missions abroad whereas in the instant case, the lower authorities have relied on the catalogue of a reputed Store abroad which executes orders to thousands of parties. In view of serious infirmities noticed in the basic document, namely, the invoice, the Customs authorities were fully justified in relying on the catalogue of a reputed Store and allowing a 20% discount from the list price For all these' reasons we accept the plea of the SDR that the valuation of the goods as done by the lower authorities was done correctly and should be upheld.11. We notice that in the impugned order the personal penalty imposed on the appellants was reduced from Rs. 5000/- to Rs. 3000/-.

Considering the various acts of omission and commission committed by the appellants we are of the firm view that the quantum of penalty is in no way excessive or harsh, but was fully justified.

12. In the result we find no merit in this appeal and affirm the impugned order passed by the Collector of Customs (Appeals), New Delhi.Sd/- M. Gouri Shankar Murthy Sd/- F.S. Gill Sd/- D.N. Lal Member.